Farmers confused as Obamacare deadline nears

Central Florida's Agri-LeaderAs the January 1 deadline for implementation of the Patient Protection and Affordable Care Act - better known as Obamacare - looms, uncertainty and confusion linger for many agribusinesses.

At issue is whether and to what extent the law will impact an operator's bottom line.

And there are few easy answers.

“There's only three things you can do,” said Irvine, Calif.-based labor law expert Sheldon Blumling, an attorney with the national firm Fisher & Phillips. “You can put an insurance plan together and provide coverage. You can pay the penalty. Or you can try to manage your workforce under the 30-hour-a-week standard for what constitutes full-time employees. And most of the agricultural clients I've spoken to say it's a nonstarter to try to manage their workforce under 30 hours. When it's harvest time, you have folks working 60 hours a week to get the job done.”

However, given that reality and facing an often difficult choice between the other two options, many farmers do not know enough about the controversial law to make an informed decision.

In simple terms, Obamacare requires that employers with 50 or more full-time employees provide “adequate and affordable” health insurance coverage. That means a plan that covers at least 60 percent of health care costs and for which the employee's cost does not exceed 9 1/2 percent of household income.

But in practice, the requirements are not that simple. And farmers already facing heavy administrative burdens will now see more.

“People engaged in agriculture already face a lot of filing requirements with various federal and state agencies and have for years,” said Charles Egerton, a board-certified tax attorney and partner at the Orland-based firm Dean Mead. “This will just be one more that's lumped on top. And most farmers are more focused on the business of farming than they are on paperwork related to compliance with various laws and regulations.”

The potential good news for some farmers, Egerton said, is a seasonal worker exemption for employers who exceed the threshold of 50 full-time workers, but for only 120 days or fewer per year.

“And those 120 days do not have to be consecutive,” Egerton said. “But unless they've been to a seminar or talked to an expert, many farmers still do not know about the seasonal exemption.”

Blumling agrees that the seasonal worker exemption will represent a silver lining for many growers who do not produce multiple crops for most of the year. “But it's not necessarily a simple calculation,” he said. “Like everything else about this law, it's unduly complex. The problem for a lot of farmers is that they just hear about the seasonal worker exemption, but they aren't really familiar with the details of it, so they just assume that it's a free pass out of the requirements for providing health insurance.”

Another potential complication for many agribusinesses will be a provision that deals with “full-time equivalent” employees. “That is designed to stop people from playing games with the law, where they drop workers down from 30 hours to 20 or 25 hours to [get around the law],” Egerton explained.

Determining the number of full-time equivalent employees requires the use of a mathematical formula that calculates total hours or labor for all workers, divided by 120, which is the equivalent of one full-time worker at 30 hours per week. “And that includes seasonal workers,” Egerton said. “If you have a total of 50 or more full-time or equivalent workers, you are liable under the law to either provide insurance or pay the penalties.”

Penalties next year can amount to as much as $2,000 per employee. Nevertheless, because insurance coverage can cost even more, at a minimum, some growers are opting to absorb the penalties rather than pay for insurance.

Yet another industry reality that favors farmers, however, is that because field workers are paid low wages and are also undocumented, many will not sign up for an insurance plan - often because they cannot afford it. And in turn, that exempts employers from any cost, including a penalty.

However, Egerton cautions, because of the complexity of the law and its potential costs, all farmers and ranchers should do a careful analysis of their operations to assess the impact of Obamacare on them.

“Your numbers have to be right,” Egerton says. “And you have to wade through the regulations and know where you stand and whether you're better off providing coverage or not.”

Blumling agreed that a thorough analysis of liability under the law is the only way to make a proper decision about what to do. And he advised agribusiness to seek expert assistance.

“There is no question you need to hire a professional to figure this out, whether that is a lawyer or an accountant or both,” he said. “But you need somebody who knows these rules backwards and forwards. This stuff is too complex for self-help.”